Answer:
Cost of Procedure 1: <u>$268,800</u>
Cost of Procedure 2: $<u>134,400 </u>
Explanation:
Sales $480,000.
Gross Profit 25% of $480,000.= $ 120,000
Cost of Goods Sold = 480,000-120,000= $ 360,000
Procedure 1 costs twice as much as Procedure 2
Process 1 costs $ 240,000 Process 2 costs $ 120,000
To get a gross profit of 30% the sales would increase by
0.25 480,000
0.3 x
x= 480,000*0.3/0.25= $576,000
Sales $576,000.
Gross Profit 30% of $576,000.= $ 172,800
Cost of Goods Sold = 576,000-172,800= $ 403,200
Procedure 1 costs twice as much as Procedure 2
Process 1 costs $ 268,800 Process 2 costs $ 134,400
Procedure 1
1. Cost makeup of Procedure 1:
45% direct materials, = 45% of $ 268,800 = $ 120,960
40% direct labor, = 40% of $ 268,800 = $ 107,520
<u>15% overhead.= 15% of $ 268,800 = $ 40,320 </u>
<u>Total $268,800 </u>
<u />
Procedure 2
2. Cost makeup of Procedure 2
25% direct materials,=25% of $ 134,400 = $ 33,600
50% direct labor,= 50% of $ 134,400 = $ 67,200
<u>25% overhead.=25% of $ 134,400 = $ 33,600 </u>
<u>Total 134,400</u>
1. Cost makeup of Procedure 1:
Direct materials, $ 120,960
Direct labor, $ 107,520
<u> Overhead. $ 40,320 </u>
<u>Total $268,800 </u>
<u />
Procedure 2
2. Cost makeup of Procedure 2
Direct materials $ 33,600
Direct labor, $ 67,200
<u> Overhead. $ 33,600 </u>
<u>Total 134,400 </u>
